I went to IM Lanzarote in 2002. It's a magical place.
Cost-wise, the two bedroom bungalow I rented was in the neighborhood of $1,200-$1,500 for two weeks. It was furnished nicely and I found it online:
http://www.holiday-rentals.com/ As for food, restaurant prices are reasonable. Although it's a vacation area, it's not too spendy. Grocery prices are slightly higher due to the fact that pretty much everything is imported from the mainland. I ate "out" a few times during my stay and probably spent $300-$400 on food.
Club LaSanta is also a very attractive spot. I stayed in Puerto del Carmen (where the race starts and finishes), and I preferred that to staying at LaSanta and having to ride a bus across the island (20-25 mins). Either works fine, I was a little more interested in getting away from the hustle and bustle of race activity.
I have also done IM Austria in the past (2000). Both of these races are terrific events and I enjoyed them both for different reasons.
Lanzarote is more exotic. There is plenty to see and do. Nightlife is great, fabulous restaurants and numerous MUST SEE spots all over the island. I actually rented a moped for a week to see the island and ride the bike course. Note: make sure you know where all the gas stations are on the island before venturing off on such a trip... else you might be pushing a scooter for longer than you may like. ;o)
Austria has many endearing features of it's own. Klagenfurt is a day trip away from Venice, Italy and there isn't anything like seeing the Alps on the train. The atmosphere and the people are terrific and hard to beat anywhere.
My own assessment FWIW is that Lanzarote is the perfect IM to do for a vacation/romantic getaway. With the nightlife, the restaurants, the artistic landmarks (Cesar Manrique was a local art/architectural hero born on the island), the seculded beaches and all the vineyards around the island it seems to be designed for couples.
Austria, on the other hand is more of your standard european getaway. It's easy to blend in, in Austria and take day trips or just enjoy the local fare. Life goes by a slower tempo there, or so it seems without having the ultra-slow beach pace of life.
Either place is a great destination, and you are sure to enjoy it. Feel free to shoot me a personal message if you'd like any advice on must-see spots.
Jeff Larson
"You must be the change you wish to see in the world."
-Ghandi